UK decom costs plummet 25%: industry report

UK offshore decommissioning costs have plummeted 25% over the past five years, according to the latest North Sea Transition Authority (NSTA) estimates.

It will cost £44.5bn ($53.8bn) to fully decommission UKCS installations, the UK regulator said on August 4, down 2% year/year and by £15bn since 2017, when NSTA introduced its baseline £59.6bn estimate.

NSTA was targeting an even larger 35% five-year reduction, but now says this was always supposed to be ambitious, a bid to drive "significant" industry savings.  Knowledge sharing from prior decommissioning experience, along with improved execution, were cited as the key reasons for the strong performance.

Lower costs should also mean "huge" savings for the public purse, NSTA added, given the sizeable tax reliefs awarded to decom projects. In 2021, decom spending amounted to £1.2bn but in 2022-24 is forecast to rebound to £1.5bn-2bn/yr in 2022-24, and will hit more than £2.5bn/yr by 2040 as more ageing North Sea assets are stood down.

Inflation, higher energy prices and supply chain challenges could also limit the scope for further cost reductions, though the NSTA's verdict was bullish overall. The report said: "Improving performance on costs is likely to be challenging in the short term... therefore, the report calls on industry to redouble its efforts, ensuring that it plans effectively, collaborates on innovative commercial models, deploys new technologies and , where possible, reuses and repurposes infrastructure - all of which are priority areas in the NSTA Decommissioning Strategy."

Reduced end-of- field life costing will naturally mean lower total project spending. So far, over the last five years, the UKCS has witnessed a 20-25% reduction from initial costing predictions. "Importantly, the scale of reductions to the estimate is reflected in the final costs of completed projects," NSTA said.